2010/11

A new 50% rate of income tax is introduced that will apply to taxable non-savings and savings income above £150,000.

The basic personal allowance will gradually be reduced to nil for individuals with adjusted net income above £100,000.

There will be three rates of tax for dividends - 20%, 32% and 42.5%.

Notes

1. Ages are as the end of the tax year. Ages for the MCA relate to the elder of spouse or civil partner.
2. MCA is available only to those couples where at least one spouse or civil partner was born before 6 April 1935.
3. The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £22,900 until the basic allowance is reached. Similar limits apply to the married couple's allowance: the loss of tax reduction is 10p for each £2 of excess income until the minimum of £267 is reached. (For couples married before 5 December 2005, only the husband's income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner's income is taken into account).

Corporation tax payable

For small and medium sized companies

• Nine months and one day after the end of the accounting period

For large companies

• Instalments
  • The 14th day of the seventh, tenth, 13th and 16th months after the commencement of a 12 month accounting period
• Balance
  • Nine months and one day after the end of the accounting period

It is possible to transfer unused nil-rate band allowances between spouses or civil partners. For individuals where death has occurred after 9 October 2007 a claim may be made to utilise any unused nil rate band from their deceased spouse or civil partner's estate.

The amount of the nil rate-band potentially available for transfer will be based on the proportion of the nil-rate band unused when the first spouse or civil partner died. If on the first death the chargeable estate is £156,000 and the nil-rate band is £312,000, then 50% of the original nil-rate band is unused. If the nil rate band when the surviving spouse dies is £350,000, then that would be increased by 50% to £525,000.

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. This may then be reduced by taper relief.

Inheritance nil rate band increasing to £350,000

The Government has announced the IHT nil rate band for 2010/11 at £350,000.

Main exemptions

1. Most transfers between spouses and civil partners.
2. The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year.
3. Gifts of up to but not exceeding £250p.a. to any number of persons.
4. Gifts in consideration of marriage or civil partnership: up to £5,000 by a parent, up to £2,500 by a grandparent, or up to £1,000 by any other person.
5. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
6. Gifts to charities, whether made during lifetime or on death.
7. Gifts to political parties

Notes

1. Transfers between spouses and civil partners living together are exempt.
2. Entrepreneurs' relief is available in respect of gains made on the disposal of all or part of a business, or gains made on disposals of assets following the cessation of a business or gains by certain individuals who were involved in running the business. The first £1 million of gains that qualify will be charged to CGT at an effective rate of 10%. Gains in excess of £1 million will be charged at the normal rate of 18%. An individual will be able to make claims for relief on more than one occasion, up to a lifetime total of £1 million of gains qualifying for relief.

Cars and your VAT return

VAT scale figures for private use are now based on carbon emissions. Please refer here for the scale figures for one month, three month, and annual VAT returns.

Notes

1. For those earning between £95 per week and £844 per week, employers receive a rebate of 1.4% on contracted out money purchase schemes or 3.7% on contracted out final salary schemes, and employees, a rebate of 1.6% for either scheme.
2. For children under 16, men over 65 and women over 60 there are no national insurance contributions payable, but employers' contributions remain payable.

Notes

1. Letting relief is available on let property which has been occupied as your main home.
2. Annual profits are not subject to national insurance.

For limited companies subject to corporation tax expenditure is on or after 1 April 2009, for unincorporated businesses expenditure is on or after 6 April 2009.

Assets will be dealt with either in a main rate pool, a special rate pool or a single asset pool.

1. Capital allowances allow the cost of capital assets to be written off against taxable profits. They replace the charge for depreciation in the business accounts, which is not allowable for tax relief.
2. Where a business has a chargeable period of less than a year the maximum allowance is reduced or increased pro-rata.
3. When the value of the main and special pools are less than £1,000 they may be fully written off.
4. A loss attributable to the enhanced capital allowance on ECA's may be surrendered for a cash payment of 19% of the loss surrendered, but limited to the greater of the companies PAYE and NIC liabilities for the period or £250,000
5. With effect from 1 April 2009 for corporation tax purposes and 6 April 2009 for income tax the capital allowance treatment of business cars is: Expenditure on cars with CO₂ emissions above 160 g/km will be included in the special rate pool and will attract a 10% writing down allowance (wda) and expenditure on cars with CO₂ emissions of 160 g/km or below will attract a 20% wda as part of the main pool. Cars purchased before the date of change will remain within the old rules attracting 20% wda up to a maximum of £3,000 per annum. Cars with private use will remain in single asset pools subject to the appropriate rate of wda according to their emissions.
6. The rate of relief for large companies will increase to 130% of qualifying R&D expenditure. In the case of SME R&D tax credit scheme, the rate of relief will increase to 175% for companies claiming enhanced deductions against profits.
7. IBA and ABA are being phased out and will reduce by 1% p.a. until 2010/11 when they and EZA will cease. The tax written down value of the building will however continue to reduce at 4% of cost until that time.

There have been many changes announced, please contact us for details that you consider apply in the future.

In order to attract a deduction in computing the profits of a trade or business any expenses must be incurred wholly and exclusively for the purpose of the trade. Capital expenditure is not an allowable expense (capital allowances are claimed on these costs), and certain other expenses are barred by statute. However, there are a number of expenses which while deductible also have other favourable tax treatment.

If you find any of these of interest, please do discuss with us the detail of the arrangements as some are quite restrictive.

Notes

1. An annual Christmas party or similar annual event for staff is an allowable expense, and is not taxable on the staff attending provided the cost per head does not exceed £150. The excess is taxable on the staff attending as a benefit in kind.
2. This exemption does not apply to gifts of money. Subsequent awards must be more than 10 years after the last gift; the award is not taxable on the recipient.
3. Either a payment may relate to the first year net financial benefit, or to ongoing net financial benefit, but not both. Various terms and conditions apply for the recipient to receive the payment tax free.
4. The maximum amount is shared between the number of recipients for the same suggestion.
5. Where employees work form home (including on an occasional basis) payments of up to the exempt amount in respect of additional household expenses are not taxable on them. If the employer chooses to make higher payments, they will be tax free if they do no more than reimburse reasonable additional costs incurred because the employee is working from home.
6. Staff in receipt of tax free relocation packages must meet a number of stringent conditions.
7. The gifts may not be food, drink or tobacco, and the limit applies to all gifts to the same recipient in an accounting period. VAT is also recoverable on gifts, subject to this financial limit, but the restriction of food, tobacco and alcohol does not apply.
8. Sports facilities made available to staff are not taxable on them as a benefit in kind provided certain conditions are met. The main condition is that the facilities are not also available to the public, so this prevents payment of sports club membership for staff. The exemption also cannot apply to the provision of cars, boats or aircraft and similar, nor to facilities on domestic premises.
9. The provision of full time care in a work place nursery is tax free on staff provided it is offered to all. Otherwise a contribution to the cost of care paid direct to the childcare provider under a contract with the employer, or through the provision of childcare vouchers is tax free up to the weekly limit. Again, detailed conditions apply to this exemption.

Notes

1. The fixed penalties for late self assessment returns cannot exceed the tax outstanding on the due date for the return. If all of the tax has been paid the fixed penalty is zero. This does not apply to partnership and trust returns.
2. VAT default surcharge also applies when the VAT return has been submitted but the VAT remains unpaid. The penalty is calculated at the rate shown applied to the VAT outstanding. Late repayment returns still register as a default, but no penalty is due.
3. Penalties at 2% and 5% are not levied if the amount of the penalty does not exceed £400, but the default still registers and increases the potential penalty for the next default.
4. Taxpayers who file late paper return, but pay all of their tax outstanding before 31 January 2010 will have their penalty "capped" at zero.
   So a late paper return will not, accrue a penalty provided that the tax is paid by the due date. This does not apply to partnership returns.

Limited company accounts – late filing penalties

With effect from 1 February 2009 penalties for late filing of accounts increased. These penalties represent an increase of 50 percent and are intended to take account of inflation from 1992 to 2007.

From 1 February 2009 the penalties are:

2011 and beyond

From 6 April 2011 the dividend trust rate will be 42.5% and the trust rate of tax will increase to 50%.

Notes

1. Trust income within the standard rate band is not taxable at the rate applicable to trusts, but bears the rate of tax appropriate to that type of income - savings income at 20%, dividends at 10%.
2. Trustees are liable at the rate applicable to trusts and the related dividend rate if they have power to accumulate income or have discretion over whether the income is made available to beneficiaries.
3. Income taxed on the settlor of a trust, rather than the trustees is taxed as the settlor's top slice of income. This normally arises when the settlor has retained an interest in the trust, but also applies where the trust is for the benefit of his infant children.
4. Capital invested on behalf of an infant unmarried child is treated as a settlement and the income is taxed on the settlor parent if it exceeds the exempt amount.
5. The annual exempt amount is divided by the number of settlements created after 6 June 1978, subject to the minimum amount. There is no annual exempt amount available when the gains are taxable on the settlor under the settlor interested trust provisions.
6. Where a trust has vulnerable beneficiaries, including a minor child who has lost a parent, the trustees may claim to reduce their tax liability (income and capital gains tax) to that which would be borne by the beneficiary. This gives the trustees the benefit of the beneficiary's personal allowances and basic rate band.
7. Bare trusts established for the settlor's children benefit from CGT annual exemption. Income is subject to the £100 limit then taxed on the parent as their top slice of income.

Notes

1. The remittance basis of taxation for non UK income and gains must be claimed by most taxpayers who are UK resident but not domiciled here, or not ordinarily resident. Before that the remittance basis was automatic for non UK income and gains.
2. Those with unremitted foreign income and gains below the limit of £2,000 are automatically entitled to the remittance basis, with no loss of allowances.
3. Where the remittance basis is claimed the taxpayer loses his right to UK income tax personal allowances and capital gains tax annual exemption.
4. For those who have been resident for the year of claim and at least seven of the previous nine tax years the remittance basis is only available on payment of the amount shown, as a tax charge on unremitted income and gains. This payment is in addition to the tax on remitted income and gains. No UK personal allowances or capital gains tax exemption would be available. The charge does not apply to children aged under 18. The change counts as UK tax paid for the purposes of Gift Aid.
5. If funds are remitted to the UK to pay the £30,000 charge, tax will be due on any remitted income in the normal way. However, it is permitted to pay the charge direct from a foreign source and avoid additional UK tax.

Fuel-only mileage rates

HM Revenue & Customs advisory mileage rates for employee private mileage reimbursement or employer reimbursement of business mileage are:

From 1 January 2009

From 1 June 2008 to 31 December 2008

HM Revenue & Customs have announced that rates will now be reviewed biannually and generally any changes will take effect on 1 January and 1 July. This area of our site will be updated around the beginning of June and December about one month before any change takes effect.

For employees using their own transport

The approved maximum tax and national insurance free mileage allowances for employees using their own transport for business are as follows:

Will these rates change?

We understand the HMRC have indicated in a response to a Parliamentary enquiry that it is not intended that these rates will change.

Income Tax and NICs are due when allowances exceed these rates. Employees can claim tax relief on any shortfall.

Rates of up to 5p per mile, per passenger, are also tax and NIC free when paid for the carriage of fellow employees in a car or van on the same business trip.

Chargeable on employees earning £8,500 or over (including benefits), and directors. The fuel benefit charge multiplier (FBC) for 2009/10 is £16,900.

Car benefit

The tax you pay on your company car is governed by five factors:

• The list price of the car, on the day before it was first registered, plus certain accessories,
• The rate at which the car emits carbon dioxide (CO2),
• The fuel type (for most types of car, this is all the information you need to work out the taxable benefit)
• Your highest rate of income tax
• Any capital contribution to the cost of the car up to a maximum of £5,000

You can find your taxable percentage for 2009/10 using the following table:

How to find out how much CO2 your company car emits – see:

• The car’s V5 registration document
• Your dealer
• The data pages of car magazines (current models)
• The Vehicle Certification Agency – www.vca.gov.uk
• The website of the Society of Motor Manufacturers and Traders - www.smmt.co.uk/co2/co2search.cfm

Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages apply, regardless of fuel type:

Car fuel benefits

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.

The taxable car fuel benefit, for 2009/10, is calculated by multiplying £16,900 by the same percentage as applies (or would apply) for the car benefit.

Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 172 g/km of CO2.

If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 23% x 40% = £1,656

If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2009/10 tax bill for the fuel is: £16,900 x 23% x 40% = £1,554.80.

Company vans

The taxable benefit for the unrestricted use of company vans is £3,000 (with no reduction for older vans) plus a further £500 of taxable benefit if fuel is provided by the employer for private travel.

The maximum tax payable on the use of a company van is £1,400 p.a., and the employer's Class1A NIC payable is £448 p.a.

The above is for cars registered since 1 March 2001

There is no limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual's UK relevant earnings or £3,600.

If total pension input exceeds the annual allowance of £245,000 there is a tax charge at 40% on the excess. This limit does not apply in the year that full pension benefits are taken.

2010 and beyond

The annual allowance and lifetime allowances already announced up to 5 April 2016.

Budget 2009

Measures introduced in the budget will have an impact on the availability of tax relief for individuals with an income of £150,000 or more, change:

• The pattern of normal regular pension contributions; or
• The normal way in which pension contributions are accrued; and
• Total pension contributions / benefits accrued (pension savings) exceed £20,000 a year

In these circumstances please contact us for advice.

Notes

1. Transitional reliefs are available to protect pension rights built up before 6 April 2006 by registering and protecting those rights, including lump sum rights in excess of £375,000. A claim for this transitional relief must have been made by 5 April 2009. Certain pre-existing lump sum rights of more than 25% are automatically protected.
2. The annual allowance and lifetime allowance are to be frozen for a five year period from 6 April 2010.

Investment maximums for ISAs are as follows:

Notes

1. This enhanced limit for those 50 and over applies for 2008/09 and from 6 October 2009.
2. Stakeholder cash and medium term products can be held in your ISA.
3. Investments in ISAs are free of income tax and capital gains.
4. Those aged 16-17 can invest up to £3,600 only.
5. ISAs allow you to take your money out at any time without losing tax relief and furthermore you are not required to declare income and capital gains from ISA savings.
6. The income tax credit is restricted to 20%. Capital gains tax deferral relief is also available.
7. From 16 December 2008, ISA investments may now include bonds which are issued by Multilateral Institutions.

Did you know?

From 6 April 2010, the ISA limit will increase to £10,200, up to £5,100 can be saved in cash for all ISA investors.

An HMRC survey* of 1250 individuals concluded that:

• One third of ISA holders had been encouraged to save by the existence of tax-free ISAs and approximately one quarter cited tax incentives as the principle reason for saving.
• 40% of ISA holders have saved £8,000 or more in their ISA account.
• Mini cash ISAs were the most popular form of ISA
• 53% of ISA holders fund their ISAs from their income, while 28% fund their ISA by a transfer from taxable savings and 16% transferred funds from non-taxable savings.
• 14% reported that inheritances and gifts were the primary source of their ISA investments.
• 60% have never made a withdrawal from their ISA while 10% of ISA holders had made four or more withdrawals

* Individual Attitudes to Saving: Effect of ISAs on People's Saving Behaviour

The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is 0.5 per cent. The liability is subject to rounding up to the nearest £5.

Stamp Duty Land Tax

Transfers of property are subject to stamp duty land tax at the following rates. The £175,000 band for residential property applies to transactions made between 3 September 2008 and 31 December 2009 inclusive. From 1 January 2010 the threshold for residential property will revert to £125,000, except where the property is situated in a disadvantaged area when it will revert to £150,000.

Partnerships

Stamp duty applies to transfers of partnership interests, but the amount payable will not exceed the amount that would have been payable on the value of any shares or securities included in the transfer.

Stamp duty land tax (SDLT) applies to the transfer of an interest in land into or out of a partnership or the transfer of an interest in a partnership (where the partnership property includes an interest in land). The charge is based on the Robertet value of the land and the proportionate interest transferred and it applies only to partnerships whose sole or main activity is investing in or dealing in land. There is no longer an SDLT charge on transfers of partnership interests in other partnerships such as professional partnerships, farming partnerships or partnerships carrying on a trade which is not land-related.

New Leases

Duty is charged according to the net present value of all the rental payments over the term of the lease (NPV), with a single rate of 1% on residential NPV's over £125,000 and on non-residential NPV's over £150,000.

VAT is excluded from treatment as consideration provided the landlord has not opted to charge VAT by the time the lease is granted.

Lease premiums

Duty on premiums is the same as for transfers of land (except that the zero rate does not apply where rent of over £600 annually is also payable).

Zero carbon homes

Qualification for this relief will require zero carbon emissions from all energy use in the home over a year. To achieve this, the fabric of the home will be required to reach a very high energy efficient standard and be able to provide onsite renewable heat and power. The relief is available for the five years to 30 September 2012 and applies to new homes which are liable to SDLT on the first sale. SDLT relief will be available where the purchase price is up to £500,000. Where the price exceeds £500,000 the SDLT liability will be reduced by £15,000. In this circumstance the balance of SDLT will remain due.

Please contact us for further information relating to the qualifying criteria, the fabric of the building, heat and power generation and additional power for appliances.

Transfers that attract stamp duty not exceeding £5 (fixed or ad valorem) will be exempt and not have to be presented for stamping. The principal reason for this is to reduce administration for smaller transactions.

Did you know?

That the Governments expects to receive £8 billion (2008/09 £5 billion)

Change from 1 November 2009

From 1 November 2009 and 1 November 2010 Air Passenger Duty is charged based on a band that is determined by the distance of the capital city of the destination country in miles from the UK.

Did you know?

That the Governments expects to receive £1.9 billion (2008/09 £1.8 billion)

Tax on the disposal of waste on operators of landfill sites calculated according to the weight and to the type of waste deposited.

Did you know?

That the Governments expects to receive £1 billion (2008/09 £1 billion)

Gift Aid

Gift Aid allows charities to reclaim tax paid by UK individual taxpayers on any donations to UK charities. This is effected through a simple declaration and can increase the value of the donation by 25%. Thus for:

1. Individuals are able to claim higher rate relief on cash gifts and payments to charities under gift aid. Basic rate tax is treated as having been deducted, so you must pay enough tax for the year to cover the tax witheld from your Gift Aid payment.
2. Special tax reliefs apply to gifts to charities of certain types of shares and securities, or land and buildings. Until 5 April 2011, charities can claim additional tax relief on gift aid donations to compensate for the reduction in basic rate tax.
3. Self-assessment now allows individuals to divert some or all of any tax repayment due to them for the year to a charity of their choosing, and to opt for this to be treated as a Gift Aid payment, both via entries on the tax return.
4. Individuals also now have the option to make a claim for a charitable donation made in one tax year to be treated as if it had been made in the previous tax year, so long as the claim is made by inclusion on the Tax Return for the later year. So long as the later year's Return is filed in time, this would mean that a payment could rank for higher rate tax relief for the earlier year, even if the donor is liable at basic rate, only, in the tax year in which the payment is made.

Donor benefit limits

The maximum benefit a donor may receive in return for a charitable donation is as follows.

Payments made to acquire goods or services are not gifts at all and do not qualify for Gift Aid. Certain charities can however allow members free entry in return for donated membership fees.

Give As You Earn

1. Employees may authorise participating employers to deduct donations from their gross salary for forwarding to their nominated charities.
2. Employees receive tax relief in full on their donations

The information in this tax card is based upon the 2009 Budget and other earlier announcements and may be subject to amendment by the Finance Act.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.